##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended: September 25, 2010
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from
 to
 Commission File Number: 000-03905
 TRANSCAT, INC.
  Ohio
    
    16-0874418(State or other jurisdiction of
    
    (I.R.S. Employer Identification No.)incorporation or organization)
 35 Vantage Point Drive, Rochester, New York 14624(Address of principal executive offices) (Zip Code)
 (585) 352-7777
(Registrants telephone number, including area code)
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
(Do not check if a smaller reporting company)
    
    Smaller reporting company þ
 o þ




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##### 



Page(s)PART I. FINANCIAL INFORMATIONItem 1. Consolidated Financial Statements:Statements of Operations and Comprehensive Income for the Second Quarter and Six
Months Ended September 25, 2010 and September 26, 2009
    
    
    3Balance Sheets as of September 25, 2010 and March 27, 2010
    
    
    4Statements of Cash Flows for the Six Months Ended September 25, 2010 and
September 26, 2009
    
    
    5Statement of Shareholders Equity for the Six Months Ended September 25, 2010
    
    
    6Notes to Consolidated Financial Statements
    
    
    7-10Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
    
    
    11-19Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    19Item 4. Controls and Procedures
    
    
    19-20PART II. OTHER INFORMATIONItem 6. Exhibits
    
    
    20SIGNATURES
    
    
    21INDEX TO EXHIBITS
    
    
    22EX-31.1EX-31.2EX-32.1
  2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 ITEM 1.
    
    CONSOLIDATED FINANCIAL STATEMENTS
 TRANSCAT, INC.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
  (Unaudited)
    
    
    (Unaudited)Second Quarter Ended
    
    
    Six Months EndedSeptember 25,
    
    
    September 26,
    
    
    September 25,
    
    
    September 26,2010
    
    
    2009
    
    
    2010
    
    
    2009Product Sales
    
    $
    13,472
    
    
    $
    11,970
    
    
    $
    26,447
    
    
    $
    23,238Service Revenue
    
    
    7,448
    
    
    
    6,525
    
    
    
    15,101
    
    
    
    12,465Net Revenue
    
    
    20,920
    
    
    
    18,495
    
    
    
    41,548
    
    
    
    35,703Cost of Products Sold
    
    
    10,270
    
    
    
    9,306
    
    
    
    19,744
    
    
    
    17,926Cost of Services Sold
    
    
    5,692
    
    
    
    5,017
    
    
    
    11,488
    
    
    
    9,720Total Cost of Products
and Services Sold
    
    
    15,962
    
    
    
    14,323
    
    
    
    31,232
    
    
    
    27,646Gross Profit
    
    
    4,958
    
    
    
    4,172
    
    
    
    10,316
    
    
    
    8,057Selling, Marketing and Warehouse Expenses
    
    
    2,529
    
    
    
    2,428
    
    
    
    5,578
    
    
    
    4,967Administrative Expenses
    
    
    1,522
    
    
    
    1,408
    
    
    
    3,380
    
    
    
    2,870Total Operating Expenses
    
    
    4,051
    
    
    
    3,836
    
    
    
    8,958
    
    
    
    7,837Operating Income
    
    
    907
    
    
    
    336
    
    
    
    1,358
    
    
    
    220Interest Expense
    
    
    16
    
    
    
    11
    
    
    
    28
    
    
    
    25Other Expense, net
    
    
    17
    
    
    
    17
    
    
    
    12
    
    
    
    32Total Other Expense
    
    
    33
    
    
    
    28
    
    
    
    40
    
    
    
    57Income Before Income Taxes
    
    
    874
    
    
    
    308
    
    
    
    1,318
    
    
    
    163Provision for Income Taxes
    
    
    347
    
    
    
    120
    
    
    
    513
    
    
    
    64Net Income
    
    
    527
    
    
    
    188
    
    
    
    805
    
    
    
    99Other Comprehensive Income
    
    
    11
    
    
    
    33
    
    
    
    10
    
    
    
    72Comprehensive Income
    
    $
    538
    
    
    $
    221
    
    
    $
    815
    
    
    $
    171Basic Earnings Per Share
    
    $
    0.07
    
    
    $
    0.03
    
    
    $
    0.11
    
    
    $
    0.01Average Shares Outstanding
    
    
    7,308
    
    
    
    7,402
    
    
    
    7,298
    
    
    
    7,396Diluted Earnings Per Share
    
    $
    0.07
    
    
    $
    0.02
    
    
    $
    0.11
    
    
    $
    0.01Average Shares Outstanding
    
    
    7,541
    
    
    
    7,611
    
    
    
    7,537
    
    
    
    7,609
  3




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TRANSCAT, INC.
 
 CONSOLIDATED BALANCE SHEETS
  (Unaudited)September 25,
    
    
    March 27,2010
    
    
    2010ASSETSCurrent Assets:Cash
    
    $
    51
    
    
    $
    123Accounts Receivable, less allowance for doubtful accounts of $97 and
$82 as of September 25, 2010 and March 27, 2010, respectively
    
    
    9,112
    
    
    
    11,439Other Receivables
    
    
    1,205
    
    
    
    418Inventory, net
    
    
    7,297
    
    
    
    5,906Prepaid Expenses and Other Current Assets
    
    
    919
    
    
    
    915Deferred Tax Asset
    
    
    564
    
    
    
    566Total Current Assets
    
    
    19,148
    
    
    
    19,367Property and Equipment, net
    
    
    4,095
    
    
    
    4,163Goodwill
    
    
    10,038
    
    
    
    10,038Intangible Assets, net
    
    
    1,129
    
    
    
    1,234Deferred Tax Asset
    
    
    438
    
    
    
    533Other Assets
    
    
    381
    
    
    
    378Total Assets
    
    $
    35,229
    
    
    $
    35,713LIABILITIES AND SHAREHOLDERS EQUITYCurrent Liabilities:Accounts Payable
    
    $
    8,077
    
    
    $
    8,798Accrued Compensation and Other Liabilities
    
    
    2,665
    
    
    
    3,171Income Taxes Payable
    
    
    12
    
    
    
    251Current Portion of Long-Term Debt
    
    
    2,132
    
    
    
    Total Current Liabilities
    
    
    12,886
    
    
    
    12,220Long-Term Debt, less current portion
    
    
    19
    
    
    
    2,532Other Liabilities
    
    
    781
    
    
    
    704Total Liabilities
    
    
    13,686
    
    
    
    15,456Shareholders Equity:Common Stock, par value $0.50 per share, 30,000,000 shares authorized;
7,738,716 and 7,698,450 shares issued as of September 25, 2010 and
March 27, 2010, respectively; 7,319,934 and 7,279,668 shares
outstanding as of September 25, 2010 and March 27, 2010, respectively
    
    
    3,869
    
    
    
    3,849Capital in Excess of Par Value
    
    
    9,808
    
    
    
    9,357Accumulated Other Comprehensive Income
    
    
    392
    
    
    
    382Retained Earnings
    
    
    9,109
    
    
    
    8,304Less: Treasury Stock, at cost, 418,782 shares as of
September 25, 2010 and March 27, 2010
    
    
    (1,635
    )
    
    
    (1,635
    )Total Shareholders Equity
    
    
    21,543
    
    
    
    20,257Total Liabilities and Shareholders Equity
    
    $
    35,229
    
    
    $
    35,713
  4




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TRANSCAT, INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
  (Unaudited)Six
Months EndedSeptember 25,
    
    
    September 26,2010
    
    
    2009Cash Flows from Operating Activities:Net Income
    
    $
    805
    
    
    $
    99Adjustments
to Reconcile Net Income to Net Cash Provided by Operating Activities:Deferred Income Taxes
    
    
    102
    
    
    
    (68
    )Depreciation and Amortization
    
    
    1,025
    
    
    
    959Provision for Accounts Receivable and Inventory Reserves
    
    
    27
    
    
    
    25Stock-Based Compensation Expense
    
    
    286
    
    
    
    370Changes in Assets and Liabilities:Accounts Receivable and Other Receivables
    
    
    1,536
    
    
    
    333Inventory
    
    
    (1,412
    )
    
    
    27Prepaid Expenses and Other Assets
    
    
    (194
    )
    
    
    (511
    )Accounts Payable
    
    
    (721
    )
    
    
    2,290Accrued Compensation and Other Liabilities
    
    
    (365
    )
    
    
    114Income Taxes Payable
    
    
    (248
    )
    
    
    (131
    )Net Cash Provided by Operating Activities
    
    
    841
    
    
    
    3,507Cash Flows from Investing Activities:Purchase of Property and Equipment
    
    
    (665
    )
    
    
    (603
    )Payments of Contingent Consideration
    
    
    
    
    
    
    (1,093
    )Net Cash Used in Investing Activities
    
    
    (665
    )
    
    
    (1,696
    )Cash Flows from Financing Activities:Revolving Line of Credit, net
    
    
    (369
    )
    
    
    (1,955
    )Payments on Other Debt Obligations
    
    
    (12
    )
    
    
    (12
    )Payments of Contingent Consideration
    
    
    (52
    )
    
    
    Issuance of Common Stock
    
    
    176
    
    
    
    109Excess Tax Benefits Related to Stock-Based Compensation
    
    
    9
    
    
    
    10Net Cash Used in Financing Activities
    
    
    (248
    )
    
    
    (1,848
    )Effect of Exchange Rate Changes on Cash
    
    
    
    
    
    
    14Net Decrease in Cash
    
    
    (72
    )
    
    
    (23
    )Cash at Beginning of Period
    
    
    123
    
    
    
    59Cash at End of Period
    
    $
    51
    
    
    $
    36Supplemental Disclosures of Cash Flow Activity:Cash paid during the period for:Interest
    
    $
    27
    
    
    $
    40Income Taxes, net
    
    $
    698
    
    
    $
    265
  5




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TRANSCAT, INC.
 
 CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY
   CapitalCommon Stock
    
    
    In
    
    
    Accumulated
    
    
    
    
    
    
    Treasury StockIssued
    
    
    Excess
    
    
    Other
    
    
    
    
    
    
    Outstanding$0.50 Par Value
    
    
    of Par
    
    
    Comprehensive
    
    
    Retained
    
    
    at CostShares
    
    
    Amount
    
    
    Value
    
    
    Income
    
    
    Earnings
    
    
    Shares
    
    
    Amount
    
    
    TotalBalance as of March 27, 2010
    
    
    7,698
    
    
    $
    3,849
    
    
    $
    9,357
    
    
    $
    382
    
    
    $
    8,304
    
    
    
    419
    
    
    $
    (1,635
    )
    
    $
    20,257Issuance of Common Stock
    
    
    37
    
    
    
    18
    
    
    
    158
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    176Stock-Based Compensation
    
    
    
    
    
    
    
    
    
    
    264
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    264Restricted Stock
    
    
    3
    
    
    
    2
    
    
    
    20
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22Tax Benefit from Stock-Based Compensation
    
    
    
    
    
    
    
    
    
    
    9
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9Comprehensive Income:Currency TranslationAdjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2Unrecognized Prior ServiceCost, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8Net Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    805
    
    
    
    
    
    
    
    
    
    
    
    805Balance as of September 25, 2010
    
    
    7,738
    
    
    $
    3,869
    
    
    $
    9,808
    
    
    $
    392
    
    
    $
    9,109
    
    
    
    419
    
    
    $
    (1,635
    )
    
    $
    21,543
  6




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TRANSCAT, INC.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
 NOTE 1  GENERAL
 Description of Business:
 Basis of Presentation:
 Fair Value of Financial Instruments:
 Stock-Based Compensation:
 Foreign Currency Translation and Transactions:
  7




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Earnings Per Share:
  Second Quarter Ended
    
    Six Months EndedSeptember 25,
    
    September 26,
    
    September 25,
    
    September 26,2010
    
    2009
    
    2010
    
    2009Average Shares Outstanding  Basic
    
    
    7,308
    
    
    
    7,402
    
    
    
    7,298
    
    
    
    7,396Effect of Dilutive Common Stock Equivalents
    
    
    233
    
    
    
    209
    
    
    
    239
    
    
    
    213Average Shares Outstanding  Diluted
    
    
    7,541
    
    
    
    7,611
    
    
    
    7,537
    
    
    
    7,609Anti-dilutive Common Stock Equivalents
    
    
    617
    
    
    
    636
    
    
    
    610
    
    
    
    631
 Subsequent Events:
 Reclassification of Amounts:
 NOTE 2  DEBT
 Description:
 Interest and Commitment Fees: 1 2
 Covenants:
 Other Terms:
 NOTE 3  STOCK-BASED COMPENSATION
   8




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Restricted Stock:
  Stock Options:
  WeightedAverage
    
    
    Weighted AverageNumber
    
    
    Exercise
    
    
    Remaining
    
    
    AggregateOf
    
    
    Price Per
    
    
    Contractual
    
    
    IntrinsicShares
    
    
    Share
    
    
    Term (in years)
    
    
    ValueOutstanding as of March 27, 2010
    
    
    674
    
    
    $
    5.72Granted
    
    
    
    
    
    
    Exercised
    
    
    (7
    )
    
    
    2.60Cancelled/Forfeited
    
    
    
    
    
    
    Outstanding as of September 25, 2010
    
    
    667
    
    
    
    5.75
    
    
    
    6
    
    
    $
    1,027Exercisable as of September 25, 2010
    
    
    516
    
    
    
    5.28
    
    
    
    6
    
    
    
    1,003
   Warrants:
 WeightedAverageNumber
    
    
    Exercise
    
    
    Remaining
    
    AggregateOf
    
    
    Price Per
    
    
    Contractual
    
    IntrinsicShares
    
    
    Share
    
    
    Term

    
    ValueOutstanding as of March 27, 2010
    
    
    41
    
    
    $
    4.89Granted
    
    
    
    
    
    
    Exercised
    
    
    (20
    )
    
    
    4.26Cancelled/Forfeited
    
    
    (4
    )
    
    
    4.26Outstanding as of September 25, 2010
    
    
    17
    
    
    
    5.80
    
    
    Less than 1 year
    
    $
    21Exercisable as of September 25, 2010
    
    
    17
    
    
    
    5.80
    
    
    Less than 1 year
    
    
    21
 9




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NOTE 4  SEGMENT INFORMATION
  Second Quarter Ended
    
    
    Six Months EndedSeptember 25,
    
    
    September 26,
    
    
    September 25
    
    
    September 262010
    
    
    2009
    
    
    2010
    
    
    2009Net Revenue:Product Sales
    
    $
    13,472
    
    
    $
    11,970
    
    
    $
    26,447
    
    
    $
    23,238Service Revenue
    
    
    7,448
    
    
    
    6,525
    
    
    
    15,101
    
    
    
    12,465Total
    
    
    20,920
    
    
    
    18,495
    
    
    
    41,548
    
    
    
    35,703Gross Profit:Product
    
    
    3,202
    
    
    
    2,664
    
    
    
    6,703
    
    
    
    5,312Service
    
    
    1,756
    
    
    
    1,508
    
    
    
    3,613
    
    
    
    2,745Total
    
    
    4,958
    
    
    
    4,172
    
    
    
    10,316
    
    
    
    8,057Operating Expenses:Product (1)
    
    
    2,296
    
    
    
    2,302
    
    
    
    5,170
    
    
    
    4,657Service (1)
    
    
    1,755
    
    
    
    1,534
    
    
    
    3,788
    
    
    
    3,180Total
    
    
    4,051
    
    
    
    3,836
    
    
    
    8,958
    
    
    
    7,837Operating Income
    
    
    907
    
    
    
    336
    
    
    
    1,358
    
    
    
    220Unallocated Amounts:Total Other Expense, net
    
    
    33
    
    
    
    28
    
    
    
    40
    
    
    
    57Provision for Income Taxes
    
    
    347
    
    
    
    120
    
    
    
    513
    
    
    
    64Total
    
    
    380
    
    
    
    148
    
    
    
    553
    
    
    
    121Net Income
    
    $
    527
    
    
    $
    188
    
    
    $
    805
    
    
    $
    99
 
 (1)
    
    Operating expense allocations between segments were based on actual amounts, a percentage of revenues, headcount, and
managements estimates. NOTE 5  ACQUISITIONS
   10




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ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Forward-Looking Statements:
 CRITICAL ACCOUNTING POLICIES AND ESTIMATES
 Accounts Receivable:
 Stock-Based Compensation:
   11




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Revenue Recognition:
 Reclassification of Amounts:
 RESULTS OF OPERATIONS
  (Unaudited)
    
    (Unaudited)Second Quarter Ended
    
    Six Months EndedSeptember 25,
    
    September 26,
    
    September 25,
    
    September 26,2010
    
    2009
    
    2010
    
    2009Gross Profit Percentage:Product Gross Profit
    
    
    23.8
    %
    
    
    22.3
    %
    
    
    25.3
    %
    
    
    22.9
    %Service Gross Profit
    
    
    23.6
    %
    
    
    23.1
    %
    
    
    23.9
    %
    
    
    22.0
    %Total Gross Profit
    
    
    23.7
    %
    
    
    22.6
    %
    
    
    24.8
    %
    
    
    22.6
    %As a Percentage of Total Net Revenue:Product Sales
    
    
    64.4
    %
    
    
    64.7
    %
    
    
    63.7
    %
    
    
    65.1
    %Service Revenue
    
    
    35.6
    %
    
    
    35.3
    %
    
    
    36.3
    %
    
    
    34.9
    %Total Net Revenue
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Selling, Marketing and Warehouse Expenses
    
    
    12.1
    %
    
    
    13.1
    %
    
    
    13.4
    %
    
    
    13.9
    %Administrative Expenses
    
    
    7.3
    %
    
    
    7.6
    %
    
    
    8.1
    %
    
    
    8.0
    %Total Operating Expenses
    
    
    19.4
    %
    
    
    20.7
    %
    
    
    21.5
    %
    
    
    21.9
    %Operating Income
    
    
    4.3
    %
    
    
    1.9
    %
    
    
    3.3
    %
    
    
    0.7
    %Interest Expense
    
    
    0.1
    %
    
    
    0.1
    %
    
    
    0.1
    %
    
    
    0.1
    %Total Other Expense, net
    
    
    0.1
    %
    
    
    0.1
    %
    
    
    0.0
    %
    
    
    0.1
    %Total Other Expense
    
    
    0.2
    %
    
    
    0.2
    %
    
    
    0.1
    %
    
    
    0.2
    %Income Before Income Taxes
    
    
    4.1
    %
    
    
    1.7
    %
    
    
    3.2
    %
    
    
    0.5
    %Provision for Income Taxes
    
    
    1.7
    %
    
    
    0.6
    %
    
    
    1.2
    %
    
    
    0.2
    %Net Income
    
    
    2.4
    %
    
    
    1.1
    %
    
    
    2.0
    %
    
    
    0.3
    %
 12




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SECOND QUARTER ENDED SEPTEMBER 25, 2010 COMPARED TO SECOND QUARTER ENDED SEPTEMBER 26, 2009 (dollars in thousands):
 Revenue:
 Second Quarter EndedSeptember 25,
    
    
    September 26,2010
    
    
    2009Net Revenue:Product Sales
    
    $
    13,472
    
    
    $
    11,970Service Revenue
    
    
    7,448
    
    
    
    6,525Total
    
    $
    20,920
    
    
    $
    18,495
   FY 2011
    

    FY 2010Q2
    
    Q1
    

    Q4
    
    Q3
    
    Q2
    
    Q1Product Sales
Growth (Decline)
    
    
    12.5
    %
    
    
    15.1
    %
    

    
    20.5
    %
    
    
    8.5
    %
    
    
    (7.6
    %)
    
    
    (8.5
    %)
  FY 2011
    

    FY 2010Q2
    
    Q1
    

    Q4
    
    Q3
    
    Q2
    
    Q1Product Sales Per Business Day
    
    $
    214
    
    
    $
    203
    
    

    $
    230
    
    
    $
    249
    
    
    $
    190
    
    
    $
    176
  FY 2011
    

    FY 2010Q2
    
    Q1
    

    Q4
    
    Q3
    
    Q2
    
    Q1Percent of Net Sales:Direct
    
    
    73.5
    %
    
    
    74.3
    %
    

    
    75.2
    %
    
    
    70.8
    %
    
    
    77.5
    %
    
    
    75.2
    %Reseller
    
    
    24.9
    %
    
    
    24.1
    %
    

    
    23.2
    %
    
    
    27.8
    %
    
    
    21.1
    %
    
    
    23.3
    %Freight Billed to
Customers
    
    
    1.6
    %
    
    
    1.6
    %
    

    
    1.6
    %
    
    
    1.4
    %
    
    
    1.4
    %
    
    
    1.5
    %100.0
    %
    
    
    100.0
    %
    

    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
 13




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##### Table of Contents



FY 2011
    

    FY 2010Q2
    
    Q1
    

    Q4
    
    Q3
    
    Q2
    
    Q1Total Pending Product Shipments
    
    $
    1,962
    
    
    $
    1,911
    
    

    $
    1,774
    
    
    $
    2,351
    
    
    $
    1,904
    
    
    $
    1,445% of Pending Product Shipments
that are Backorders
    
    
    77.6
    %
    
    
    78.6
    %
    

    
    90.6
    %
    
    
    82.8
    %
    
    
    78.9
    %
    
    
    72.2
    %
  FY 2011
    

    FY 2010Q2
    
    Q1
    

    Q4
    
    Q3
    
    Q2
    
    Q1Service Revenue Growth
    
    
    14.1
    %
    
    
    28.8
    %
    

    
    30.6
    %
    
    
    10.7
    %
    
    
    15.5
    %
    
    
    7.2
    %
  FY 2011
    

    FY 2010Q2
    
    Q1
    

    Q4
    
    Q3
    
    Q2
    
    Q1Percent of Service Revenue:Depot/Onsite
    
    
    77.9
    %
    
    
    74.4
    %
    

    
    75.9
    %
    
    
    73.5
    %
    
    
    77.3
    %
    
    
    79.3
    %Outsourced
    
    
    19.8
    %
    
    
    23.3
    %
    

    
    21.6
    %
    
    
    24.0
    %
    
    
    20.2
    %
    
    
    18.2
    %Freight Billed to Customers
    
    
    2.3
    %
    
    
    2.3
    %
    

    
    2.5
    %
    
    
    2.5
    %
    
    
    2.5
    %
    
    
    2.5
    %100.0
    %
    
    
    100.0
    %
    

    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
 14




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##### Table of Contents



Gross Profit:
 Second Quarter EndedSeptember 25,
    
    
    September 26,2010
    
    
    2009Gross Profit:Product
    
    $
    3,202
    
    
    $
    2,664Service
    
    
    1,756
    
    
    
    1,508Total
    
    $
    4,958
    
    
    $
    4,172
     FY 2011
    

    FY 2010Q2
    
    Q1
    

    Q4
    
    Q3
    
    Q2
    
    Q1Channel Gross Profit % - Direct (1)
    
    
    25.5
    %
    
    
    25.0
    %
    

    
    24.7
    %
    
    
    23.1
    %
    
    
    23.2
    %
    
    
    24.3
    %Channel Gross Profit % - Reseller (1)
    
    
    16.6
    %
    
    
    16.9
    %
    

    
    16.0
    %
    
    
    15.0
    %
    
    
    15.6
    %
    
    
    17.0
    %Channel Gross Profit % - Combined (2)
    
    
    23.3
    %
    
    
    23.0
    %
    

    
    22.6
    %
    
    
    20.8
    %
    
    
    21.6
    %
    
    
    22.6
    %Other Items % (3)
    
    
    0.5
    %
    
    
    4.0
    %
    

    
    3.1
    %
    
    
    1.2
    %
    
    
    0.7
    %
    
    
    0.9
    %Total Product Gross Profit %
    
    
    23.8
    %
    
    
    27.0
    %
    

    
    25.7
    %
    
    
    22.0
    %
    
    
    22.3
    %
    
    
    23.5
    %
 
 (1)
    
    Channel gross profit % is calculated as net sales less purchase costs divided by net sales.(2)
    
    Represents aggregate gross profit % for direct and reseller channels, calculated as net sales less purchase
costs divided by net sales.(3)
    
    Includes vendor rebates, cooperative advertising income, freight billed to customers, freight expenses,
and direct shipping costs. 15




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##### Table of Contents



FY 2011
    

    FY 2010Q2
    
    Q1
    

    Q4
    
    Q3
    
    Q2
    
    Q1Service
Gross
Profit
Dollar
Growth
    
    
    16.4
    %
    
    
    50.1
    %
    

    
    25.4
    %
    
    
    15.0
    %
    
    
    25.5
    %
    
    
    2.9
    %
 Operating Expenses:
 Second Quarter EndedSeptember 25,
    
    
    September 26,2010
    
    
    2009Operating Expenses:Selling, Marketing and Warehouse
    
    $
    2,529
    
    
    $
    2,428Administrative
    
    
    1,522
    
    
    
    1,408Total
    
    $
    4,051
    
    
    $
    3,836
  Taxes:
 Second Quarter EndedSeptember 25,
    
    September 26,2010
    
    2009Provision for Income Taxes
    
    $
    347
    
    
    $
    120
  SIX MONTHS ENDED SEPTEMBER 25, 2010 COMPARED TO SIX MONTHS ENDED SEPTEMBER 26, 2009 (dollars in
thousands):
 Revenue:
 Six Months EndedSeptember 25,
    
    
    September 26,2010
    
    
    2009Net Revenue:Product Sales
    
    $
    26,447
    
    
    $
    23,238Service Revenue
    
    
    15,101
    
    
    
    12,465Total
    
    $
    41,548
    
    
    $
    35,703
   16




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##### Table of Contents



Gross Profit:
 Six Months EndedSeptember 25,
    
    
    September 26,2010
    
    
    2009Gross Profit:Product
    
    $
    6,703
    
    
    $
    5,312Service
    
    
    3,613
    
    
    
    2,745Total
    
    $
    10,316
    
    
    $
    8,057
     Operating Expenses:
 Six Months EndedSeptember 25,
    
    
    September 26,2010
    
    
    2009Operating Expenses:Selling, Marketing and Warehouse
    
    $
    5,578
    
    
    $
    4,967Administrative
    
    
    3,380
    
    
    
    2,870Total
    
    $
    8,958
    
    
    $
    7,837
  17




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##### Table of Contents



Taxes:
 Six Months EndedSeptember 25,
    
    September 26,2010
    
    2009Provision for Income Taxes
    
    $
    513
    
    
    $
    64
  LIQUIDITY AND CAPITAL RESOURCES
  Cash Flows:
 Second Quarter EndedSeptember 25,
    
    September 26,2010
    
    2009Cash (Used in) Provided by:Operating Activities
    
    $
    841
    
    
    $
    3,507Investing Activities
    
    
    (665
    )
    
    
    (1,696
    )Financing Activities
    
    
    (248
    )
    
    
    (1,848
    )
 Operating Activities
 
    
    Inventory/Accounts Payable: Our inventory balance at September 25, 2010 was $7.3
million, an increase of $1.4 million when compared to $5.9 million on-hand on March 27,
2010. The increase was primarily due to our strategic decision to maintain higher
inventory levels of specific, higher-volume products, in support of greater sales
growth and in response to increased lead times from manufacturers. In general, our
accounts payable balance increases or decreases as a result of timing of vendor
payments for inventory receipts. However, this correlation may vary at a quarter-end
due to the timing of vendor payments for inventory receipts and inventory shipped
directly to customers, as well as the timing of product sales.
    
    Receivables: We continue to maintain strong collections on our accounts receivable.
The following table illustrates our days sales outstanding for the fiscal quarters
ended September 25, 2010 and September 26, 2009:
 September 25,
    
    September 26,2010
    
    2009Net Sales, for the last two fiscal months
    
    $
    14,937
    
    
    $
    13,172Accounts Receivable, net
    
    $
    9,112
    
    
    $
    8,279Days Sales Outstanding
    
    
    37
    
    
    
    38
 Investing Activities
 Financing Activities
 18




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##### Table of Contents



OUTLOOK
   
 ITEM 3.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 INTEREST RATES
   FOREIGN CURRENCY
   
 ITEM 4.
    
    CONTROLS AND PROCEDURES
 Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures:
 19




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##### Table of Contents



Changes in Internal Control over Financial Reporting:
 
 PART II. OTHER INFORMATION
 
 ITEM 6.
    
    EXHIBITS
  20




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##### Table of Contents



SIGNATURES
  TRANSCAT, INC.Date:  November 5, 2010

/s/ Charles P. HadeedCharles P. HadeedPresident, Chief Executive Officer and Chief Operating Officer
(Principal Executive Officer)Date:  November 5, 2010
    /s/ John J. ZimmerJohn J. ZimmerVice President of Finance and Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer) 21




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##### Table of Contents



INDEX TO EXHIBITS
 (31)
    
    Rule 13a-14(a)/15d-14(a) Certifications
 31.1
    
    Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 (32)
    
    Section 1350 Certifications
 32.1
    
    Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 22